Jack Buller sits down with Mike about CPG suppliers implications of on-shelf availability and out of stocks.

Jack is a former operations leaders at P&G and understands the role of the CPG customer in driving OSA. The CPG role does not end when they deliver the product to the retailer. Learn how CPG companies invest in retails coverage to drive OSA and sales for their business.

Donnie Williams 0:04

Welcome to Season Two of the SCMRC Lead podcast featuring epic supply chain lessons from our industry partners. My name is Donnie Williams and I am the Executive Director of the Supply Chain Management Research Center in the Walton College at the University of Arkansas. Season Two of the podcast will be hosted by Mike Graen. Mike is the director of the retail supply chain initiative, and this is a strategic partnership within the SCMRC. The goal of this initiative is to surface the challenges and opportunities of on shelf availability or OSA. Focusing on the concepts tools and technologies driving retail OSA. Season Two will feature a dynamic guest list of retailers, CPG suppliers, solution providers and industry leaders to drive collaborative efforts and advanced learning within the industry. Thank you for joining and enjoy the podcast.

Mike Graen 1:02

Jack Buller 1:39

Pleasure to be here. I look forward to helping.

Mike Graen 1:41

Awesome. We also have the pleasure of having a actual supply chain student at the University of Arkansas. James Rainey is joining us he's going to listen to the wisdom that Jack imparts to us after so many years in the industry. But he also will probably be prepared for a couple of questions. James, you want to go ahead and introduce yourself real quick?

James Rainey 1:59

Yes sir, hi my name is James Rainey. I am currently a junior undergrad student at the University of Arkansas. I'm pursuing a supply chain major with an Information Systems minor. And I do have a bit of background in store operations in terms of I did work with a direct store distributor over the summers with Pepperidge Farm. So that's a little bit about my background.

Mike Graen 2:25

Awesome. Awesome. James, thanks for being part of this, we really do appreciate it. Hey, Jack, you've been around for a couple years, just a couple years. And always in kind of sales, but mostly in retail operations. And as I shared with the class this week, at the University of Arkansas, there's basically three big buckets of why things are not on the shelf. Number one is inventory that's incorrect, on hands that are not correct. Therefore, products not being ordered ghost inventory, we call that. Supply chain, which, six months ago, nobody knew what the word supply chain means and that's now that's all everybody talks about. And then store operations, ie the products in the building somewhere. It's not on the shelf where it's supposed to be. I really want to delve into the whole store operations part of that, because that's been your world, right doing this so many years for Proctor and Gamble. Before I do that, I always like to make these personal stories, right. And my personal story is as a customer, I went in and bought trying to buy some stuff and couldn't get it because the store said they had it and they didn't. And I've told that story enough times on these podcasts. I'm not going to repeat it before. But it was a extremely frustrating experience for me. Do you have a story as a customer where you tried to acquire some product from a store? Only to find out they did not have the product in the store? Tell us about it if you've got one.

Jack Buller 3:56

That's a great question. And it happens all the time. I think many of us can relate to that. I can remember going into a store. It wasn't a grocery store, a mass store, but I was buying electronics. And I had a particular item that I needed to buy. I had done my research. I wasn't as worried about price. I wanted to get it. I walked in the store. It wasn't on the shelf. So immediately I started to feel some anxiety because I needed to buy the item. It wasn't discretionary. And so I started to create blame for the store. I wasn't mad at the brand. I was mad at the store. The irony was there was a clerk right there. And the clerk said, I asked the clerk Do you have any of this? It was a router I believe. And they came back and said Oh yeah, I'm sure it's probably in that pallet over there. But it's locked right now. And I said well, could you open it up and provide me that item? They said well, I really don't have a key and the guy with the keys on break. And they said you know, you probably could buy it online as well. They presumed that I was going to use their online service. So I did, I immediately went to a different online company, I bought it for less money. And that person never knew, really, about the lost sales. And it changed my purchase patterning because it became so easy for me to do it. So one I had frustration, I solved it. And it was at the detriment of the retailer, and they didn't even know it.

Mike Graen 5:34

Wow. You know, I do a lot of work with Walmart. And as Mr. Sam Walton used to have a saying, which is, you know, for every one customer that complains, seven don't and they just don't come back. So that's a great example for that one little decision that says, I can't help you cost the lost sale and maybe create an environment where the new retailer you got the product from became your new go to place.

Jack Buller 6:02

That's that is exactly what happened on electronics, it surely did.

Mike Graen 6:05

Awesome. Awesome. Well, I thought router I thought, I thought furniture router, I was like, we go with the router router is only used to be able to do furniture work. But obviously James and you guys know more about that than I do, obviously. So store this, this is a perfect segue because this was not a ghost inventory, Phantom inventory situation. This was not a supply chain issue. This was a the product was really, really, really in the store. And you just couldn't you couldn't buy it and you went away disappointed. So a great segue into my kind of my second question, what's the role of store operations and getting the product on the shelf for customers?

Jack Buller 6:44

Yeah. It's almost as simple as that it's to have complete awareness of what inventory is in the store. And making sure that the amount of time that goes from when it comes in getting out to the shelf is absolutely minimal. A lot of times, retailers will have windows of time in which they need to get their trucks unloaded and then restock the shelves. The way that we think about in stock is about reducing the duration. Because if we reduce the duration, we reduce the loss sales, and it's about the money, not the percentage. So the role of the store to me has got to be the minute something comes in either the system or the laborer gets it to the home location as fast as possible to minimize any duration to minimize duration of out of stock. Obviously, that's under siege today because of current labor dynamics. And these labor dynamics probably aren't going to go away, which calls for different kinds of solutions that I know we'll probably talk about.

Mike Graen 7:51

Well, building on that, the causes of the labor, so you really just don't have enough labor to get the product out of the back room, unload the truck, get the product on the line. So walk us through a typical flow. I think intuitively people understand it. But a truck arrives, how does it get from there to actually the store shelf? And what are the reasons why it never makes it there? Or it tries to go there, but it's not available? Where does it go? What just walk us through what the normal retailer, what does that process look?

Jack Buller 8:20

Yeah, great question. So the truck comes in, it's validated, it's unloaded. Some retailers have technology that will literally guide particular products to go into a dolly or a wheeled cart that is going to automatically take it to the shelf, they have visibility to how many pieces are already on the shelf. So they know if there's enough room for more product to go there. Some items sell so fast, the shelf could be full, but at the end of the day, it could be empty, so that's why. Other retailers do not have that visibility. So it's a trial by error. So when product comes in, they're just going to assume that they're going to load it on that cart, they're going to wheel it out to the right aisle, they might even stage it in that aisle, they might stage the entire aisle. And then they'll come along and they'll literally restock the shelf based on all the products are there. That process alone is a lot more complicated than it sounds. Because for anyone who has ever looked at particular product, and the descriptors and the shelf tags, getting the right product in the right spot on the shelf takes a certain amount of skill. So when we start thinking about root causes of labor, one of those is insufficient labor, which is a which is a growing dynamic today because of pandemic and so forth. We all know that. But there's another dynamic and that is there is a certain amount of really strong training that needs to take place. So store workers really know how to receive the product, sort the product, not only wheel it out to the shelf, but probably the most critical part of it is getting the right SKU, the right bottle, box, put where it belongs on the shelf, because that drives the entire system.

Wow. So if it's supposed to go out, I got a whole pallet of stuff that's supposed to go out. And I open up the box, and either the shelf is already full, or I don't know where that product goes, What do I do with it,

You put it back on the cart, and you take it to the back room and you pray that you've got a home for it that you can find it again. And the reality is, as many of us know, we call that back stock. So when product doesn't have a home on the sales floor for any of the reasons you named, then it goes into the back room, some retailers have very specified homes for product and therefore with technology, they can find it when they do have room to restock it. The majority of retailers frankly, have sections where they might have them organized by aisle or by type of product. But when it comes time to pull it out of backstock and restock the shelf, the the variability of being able to find it quickly. Again, remember, we are in a insufficient labor world. If they can't find it quickly, they may simply just order more or that out of stock could remain out of stock.

Got it. Got it. So what was the cause of your router situation was it had it been unloaded from the truck, just hadn't been brought out to the sales floor yet is that

It had been brought out to the sales floor. But because it was a item that could have been more prone to being stolen, the pallet was actually caged and locked. And therefore the the associate didn't have the key to unlock the the caged pallet, if you will, kind of a unique situation. But it added another step on stocking. And therefore they didn't have the key therefore they couldn't open it up.

Okay, you just you just open a whole big can of worms. So Tide detergent, you're gonna go out come out from the back room come off the truck, go to the back room, go on the shelf. Right?

Correct.

Routers, and in some cases, health and beauty aid items like razor blades and white strips, etc. They may lock it up, either in the back room or on the sales floor somewhere. So how in the world do you sell product when you got it all locked up?

Well, there's there's a couple of dynamics, there is inherently an extra step in the stocking process. Because if a product is locked up, so think about a glass covering in front of product at the shelf, that is only openable by a magnetic or a metal key. We've all experienced that. When that happens, in order to stock those products onto the shelf, that person has got to have the key to unlock the product, stock the product, and then lock it back up again. Most of the times there are only two or three people in a store who's got who have that key for security reasons. So there is a potential delay or a problem on stocking. Let alone there's a whole nother dynamic on how angry shoppers feel when it comes to locking product. We just did a study where we interviewed a number of shoppers to find out what their behavior is when they encounter locked product. 56% of the shoppers said they will wait no more than a minute for a store associate to come by and unlock that product. Otherwise, they'll either skip the product or they'll be angry enough that they'll walk out of the store. Wow, that's getting even more pronounced in a COVID world where safety and not wanting to be in the store a long time is becoming a higher priority.

You know, I sometimes wonder when I'm in a Walmart store and I see people on their phones all the time. How many are actually on their phones using Walmart Wi Fi to order their stuff on Amazon. That way, I'm not waiting to find somebody. I'm just you know, this stuff locked up and I need it. I'll just have it delivered to me. Exactly.

Yep. That's exactly right. So the whole dynamic of locking has a major effect on the store operations process, let alone the shopper.

Gotcha. Gotcha. Well, let's get James's perspective on on some of this stuff. I'm sure he is chomping it to bit to ask you a question. James, what you got for Jack?

Yeah, no. So Jack, in your experience with store operations, is there a takeaway from that you would give a direct store distributor or otherwise known as DSD that you've noticed is an effective strategy to optimize efficiency, specifically time doing audits?

Yeah, that's a great question. I think the most, one of the key things a direct store delivery delivery organization or company or DSD needs to do is they need to understand the other working processes of the store. So they know how they fit within those. DSD operators, as you will know, don't operate independently within the store, although they have a lot of autonomy. But they still have to clear certain thresholds relative to the product coming in, physically manning that product through the backroom, to the store, depending on what their source of entry is. And then once they get to the shelf to do stocking, it's probably a little bit simpler, because they're doing it. But I think to have understanding of the receiving processes, the sorting processes, and some of the thresholds that stores have to go through when they receive product, I think it's incumbent upon people to know those so they fit within that system. They're just a part of this bigger system. So that's one of the things I think is so critical.

Thank you.

So Jack, you have been doing this for a lot of years with Procter and Gamble. And now you're doing it with a company called Simpactful. Most of the work you're doing, as I understand it, is helping people drive store operations, retail coverage on shelf availability, you know, without disclosing any of, you know, any proprietary information, what are some of the key things you're seeing, that both retailers and suppliers are struggling with in terms of getting product on the shelf to customers?

Yeah, that's a great question, Mike. The number one issue is kind of counterintuitive. First of all, it starts off with the knowledge that the majority of the reasons that out of stocks occur are retailer based. There are exceptions, right now with supply chain issues, because of COVID, and so forth, the number of root causes that are in the hands of manufacturers has grown, no doubt, think about paper towels back in COVID. Think about, you know, toilet paper, and so forth. Wipes. But beyond that, as a rule 75 to 80% of the root causes are retailer driven. And yet the brands are provided by manufacturer. So there is this unique relationship. Wherever I see a CPG company and a retailer working hand in hand, they can move through most of the root causes and most of the solutions quicker. When the converse of that is when the CPG companies blame retailers for out of stocks, or retailers blame CPG companies for out of stocks, whether the reasons are accurate or not. That basically brings a halt to progress. So that that collaboration is really, really important. The other dynamic that is just an enormous growing capability is the ability to manage in stock inventory and availability through store SKU combination data. If I know where I have zero inventories on a SKU across a huge number of stores, I can take action on that either through a third party or directly with a retailer. If I find out that through store SKU data that a retailer for whatever reason, has shut forecasts down to zero, which shuts off the replenishment system. And I can identify the ones that are done accidentally or never got re-turned on that alone could rifle a whole new batch of inventory coming into the store at the right time and start to remove out of stocks. Those don't get to the root causes to prevent them. But they certainly cured them. And one of the things that we talk a lot about is what are the actions I want to do to cure out of stocks. I know they're going to come back I know they're going to reoccur. But let me trim the duration down. So the sales growth comes back to the retailer and the CPG company. And then what capabilities do I have that will prevent, that get into root cause analysis. The other barrier that I see is solving availability is hard work. It's been around a long time. We have a new set of forces at work right now think about the advent of buy online pick up in store. It used to be I had to satisfy a shopper coming in to buy now I've got someone buying a long ways away on their laptop or their phone, but they're going to pick up in store, and I've got to think about how is my inventory going to be sufficient for this unknown volume as a retailer, as a CPG company, how do I think about that unknown element as well. As long as retailers and CPG companies get to the root cause of why things are happening, and we have a lot of models that blow that out, they're gonna get closer to the truth. The history has been less root cause more trial and error, frankly, more emotional solutions that don't necessarily work or they certainly don't sustain.

Yeah. So when we were working together at Procter and Gamble, I don't think this is confidential, because you could look it up. But we had roughly 3000 SKUs rough.

Yeah.

3000 skews, 40 categories. I mean, that's all pretty well known. Well, in Walmart alone, they have 4600 stores. So three times 3000 skews time 4600, you have 13 point 8 million times that you could be off the shelf. And the ability to know is that product on the shelf right now or not is really, really a hard thing. And I think that's true. And I think the other comment that was talking to the field agent people on the last podcast, they said and this was a fascinating, most of the grocery volume happens today brick and mortar from roughly four o'clock in the afternoon until about eight o'clock at night. That's when the shopping is the most that's when most people go in the store. Well, now with buy online pickup in store, most of that's front end loaded. So it's happening early in the morning. So that whole demand cycle gets blown up where you're busy, busy shopping time is no longer just in the afternoon, evening. It's first thing in the morning. Well, wow, never, you know, what's, what implications does that have on the supply chain? So you mentioned Jack third parties, third parties specifically, I'm assuming you mean the Acosta's the cross marks, the advantages, the of the premiums, etc, the advantage of sales and marketing. Do they play a role here? Do they play an important role to get your product back on the shelf? Or even know that the products not on the shelf? And so, how do you best leverage them to do the work? Because I know that one of the functions they play is auditing, go in and capture data and take pictures etc. But there's other ways to do that, versus paying them to do that. What is the role of a third party, really to drive on shelf availability in a retail store?

I would characterize third parties 10 years ago would be a highly scaled trial by air go look for problems, fix what they can service, get displays out, stock the shelves, some auditing work, and so forth. Depending on the third party, there's also been a transformation from a selling skill within a store. So think about a higher autonomy store where decisions can be made in the store. As opposed to a more methodical merchandising role. I've got a task, I need to do the task. I've got directions, walk in the back room, find product, bring it out.

So as a student, and you know, everybody kind of livin right now in this COVID era. We hear a lot about supply chain, and students are trying to transfer over to supply chain majors and a lot it's a hot commodity, especially like right now, what would you say? Or what would you give advice to a rising student? That would probably set them aside from the pack?

That's a great question, James, what I would say is, there are some parts of business that don't carry the same panache as others, you know, supply chain forever has been one of those critical elements of a strong business. But it's detailed, and it's hard work. And what we've learned in the last two to three years, it's growth in importance of the success of a business is remarkable. There is not going to be there will not be businesses in the future that will be able to be successful without a really really strong forward thinking supply chain. It used to be all about let's squeeze as much money out of the system as we can. Let's run a supply chain as cheap as we can and still maintain getting product from point A to point B. Supply chain has become an end to end idea. It's no longer can I just get things shipped to a DC and then be done. It's can I get it to the DC can I get it to the retailer in our industry? How do I think about the store in the future as being not only a place to shop but a distribution center? That's all supply chain mentality. So for people getting into it, I would say the growth of importance is only going to get more and more profound. And frankly, it's going to get a lot more exciting, although I frankly think it's exciting anyway, because of the scope and the end to end nature of supply.

Thank you.

You're welcome.

Awesome. Jack, you have done a great job. Do you have any closing thoughts? What question did I ask you that I should have? And what would your response be?

Well, true to your style, you ask all great questions. I think, I think what I would say as I as I wrap up, the importance of having strong brand presence in stores today is even more important than it was two years ago, shopper Path to Purchase has changed and is going to continue to change. There are people who thought that shoppers were going to completely abandon retail, and just buy everything online because of generational issue issues. And because it's less friction, the truth of the matter is buying online presents friction, stuff doesn't come when I want it, I get stuff I didn't order. Buying in store creates friction. And at the end of the day, a lot of what we try to do with our clients, for example is to find ways to take all the friction away from the shopper, whether it's an online dynamic, or whether it's an in store. And there are some keys, many of which we've talked about that are absolutely going to be paramount, there's got to be a analytic database system that's going to reach the gaps as identify the gaps as quickly as possible. So we get back into the business in stock and available and shorten that duration. Number two, there needs to be a a deeper root cause mentality. So we really understand in the intricacies of retail, why the shoppers not getting what they want when they wanted it. And that last thing requires just a tremendous partnership between CPG companies and retailers, I will tell you that I have if I look back on this is successful in stock availability projects that we have managed and there have been many of them. None of them have ever happened without a collaboration between the branded side and the retail side. And that's going to be something that's going to continue to be just very critical powered by data and knowledge and processes. Period.

Awesome. Awesome. James, Jack, thank you very much for your participation, Jack, always a pleasure, incredible wisdom that you've provided, you are part of the Simpactful company. So if you if anybody wants to LinkedIn, I'm sure they can reach out and get a hold of you. I'm sure you'd be happy to take their call. Because you do have so many experiences that can bring to this party because again, you may have the best product in the world. But if customers can't buy it can't get ahold of it, bad things happen. So thank you both very much for your time, and we really do appreciate you taking the opportunity with us.

Well, I appreciate the opportunity, Mike and James and please encourage you if anybody has any questions to please reach out to us.

Great, thank you very much.

Take good care.

Thank you for taking the time for this epic discussion. And a special thanks to Mike Graen for leading the retail supply chain initiative. On behalf of the Walton SCMRC, we are delighted to lead with you as we learn, engage, address and develop all things supply chain to lead the world of commerce from Northwest Arkansas. Have a great day.

Transcribed by https://otter.ai